The share of newly listed smaller homes (up to 1750 square feet) declined year over year, while the share of homes larger than 1750 square feet increased, suggesting that buyers are choosing to purchase less expensive homes.
Interest rates continue to influence purchasing
The Federal Reserve continues to try and dampen inflation by increasing interest rates. This has led to a rise in mortgage rates as well, making it more difficult for homebuyers to afford a home.
This also means many Americans are choosing to wait it out to see if mortgage rates reach a peak, or start to decline.
The Fed’s benchmark rate will end the year at 3.4%, according to the midpoint of the target range of individual members’ expectations. That could lead to more homes on the market in the near future as Americans decide now isn’t the time to buy.
The worst situation in 15 years
Affordability has hit a 15-year low with median home prices climbing to record highs, according to data service ATTOM.
It would take the average American more than one-third of their wages to cover homeownership expenses, higher than the recommended 28%, ATTOM’s data report states.
Of the 575 counties analyzed in their most recent report, 560 were less affordable than the year before. That’s 97% of counties compared to 69% in 2021. This makes it the highest point since 2007, just before the Great Recession and housing crash.
“Extraordinarily low levels of homes for sale combined with strong demand have caused home prices to soar over the last few years,” said Rick Sharga, vice president of market intelligence at ATTOM.
“With interest rates almost doubling, homebuyers are faced with monthly mortgage payments that are between 40 and 50% higher than they were a year ago — payments that many prospective buyers simply can’t afford.”
Amy Legate-Wolfe is an experienced personal finance writer and journalist. She has a Bachelor of Arts in History from the University of Toronto, a Freelance Writing Certificate in Journalism from the University of Toronto Schools, and a Master of Arts in Journalism from Western University. Amy has worked for Huffington Post, CTVNews.ca, CBC, Motley Fool Canada, and Financial Post. She is skilled at analyzing trends and creating content for digital and print platforms. In her free time, Amy enjoys reading and watching British dramas on BritBox. She is a mother and dog-mom to a Wheaten Terrier.
